Debt is a serious ongoing issue in the U.S. In fact, it’s spiraling out of control. Studies show that a typical American has an average debt of $90,460. And credit cards account for an average debt of $6,194 per person.
Considering how high credit card interest rates can be, it’s safe to say that you are better off exploring alternative types of payment cards that will enable you to manage your finances better. And one way to improve your financial situation is to use a prepaid card to pay bills. It’s difficult to overspend money that you don’t have this way.
What Are Prepaid Cards?
Prepaid cards are those that are loaded and reloaded with money you can use to pay for products and services. They include reloaded gift cards. Open-loop versions contain a network brand logo and are acceptable in many places, but closed-loop versions are only acceptable in limited stores.
Your spending limit is dictated by the amount you have loaded onto your card. And the more you have, the more you can spend.
Unfortunately, many of them have high transaction fees associated with them. However, the benefits of using these kinds of cards are worth considering.
Read More: How to Buy Visa Gift Cards
Benefits of Using Prepaid Cards
Below are the benefits of using prepaid cards.
1. No Cash
One of the biggest benefits of using prepaid cards is that you don’t need to carry a large amount of cash with you. You can load the entire amount and make large purchases in a more secure manner.
2. No Overspending
Did you know that 31 percent of Americans tend to overspend when shopping at their local grocery store? It is much easier to do that when buying goods on credit. If you have a large credit limit, the temptation to buy things you cannot afford is much higher.
But that is not the case with prepaid cards. The amount you actually have in your account will force you to stick within the budget. In addition, you won’t attract late payment fees or interest that will spiral out of control. And that makes these kinds of cards an excellent choice for impulse buyers.
Prepaid cards can be loaded via a variety of financial sources without forcing you to depend on checking, savings or credit accounts. And they can also be used at multiple points of purchase. That means you can use them in-store and online. And you can even withdraw cash from your local ATM.
Also, you can use a prepaid card to pay bills via your phone using affiliated apps. In addition, if you refer other customers to some of the branded prepaid cards, you may get paid a commission for doing so.
4. No Credit History Headaches
To get access to many credit cards, you have to show proof you are creditworthy. That is not the case with prepaid cards. Your credit history does not matter when you use them. What business owners care about is that you can pay for the products and services you are interested in buying.
How to Pay Bills with Prepaid Cards
Below are tips on how you can use a prepaid card to pay bills.
- First, determine which prepaid card brand you would like to work with. Debit and credit card companies, such as MasterCard, American Express and Visa, are likely to offer prepaid cards. But if you intend to use government benefits to pay some of your bills, you should get the right card, which may be an EBT card or a Direct Express card.
- Register and activate the card based on the maker’s instructions.
- Write down the bills you need to pay and check whether you can afford to load all the money needed to pay them at once. Doing so would reduce your transaction fees. If not, set the maximum amount you can dedicate to your bills.
- Decide where you are going to load your prepaid cards from, depending on where you keep your money. You could use an ATM, online payment gateways, cash at approved retail points and direct deposit. Choose the option most suitable for your needs and load the card based on your financial ability.
- Pay your bills using the card by phone, online, using digital checks, in-person and via mobile apps, depending on your creditor.
- CNBC: The average American has $90,460 in debt—here’s how much debt Americans have at every age
- CNBC: Alaskans carry the highest credit card balance—here’s the average credit card balance in every state
- Consumer.Gov: Prepaid Cards
- PR News Wire: American Consumers' Average Weekly Grocery Spending Increased by 17% During the Pandemic, Despite Fewer Trips
- StreetDirectory: 10 Unbeatable Advantages of Prepaid Cards
- FISGlobal: The benefits of prepaid cards for businesses and consumers
- Be aware that virtually all prepaid cards have a limited life. Prepaid cards expire after 12 to 24 months, regardless of any cash that may be left on the card.
I have been a freelance writer since 2011. When I am not writing, I enjoy reading, watching cooking and lifestyle shows, and fantasizing about world travels.